Form 8-K First Connecticut Bancor For: Apr 20

 

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First Connecticut Bancorp, Inc. reports first quarter 2016 earnings of $0.24 earnings per share

FARMINGTON, Conn., April 20, 2016 – First Connecticut Bancorp, Inc. (the "Company") (NASDAQ: FBNK), the holding company for Farmington Bank (the "Bank"), reported net income of $3.6 million, or $0.24 diluted earnings per share for the quarter ended March 31, 2016 compared to net income of $2.5 million, or $0.17 diluted earnings per share for the quarter ended March 31, 2015.

"Despite the continued challenging operating environment, we are pleased with our first quarter results reflecting continued growth in tangible book value and earnings per share. Last year we indicated loan growth would slow during 2016, as we believe competition in the market has loosened credit standards, and we believe taking on additional credit risk to drive earnings is not prudent. We remain diligent with respect to expense control while maintaining solid overall risk management fundamentals," stated John J. Patrick Jr., First Connecticut Bancorp's Chairman, President and CEO.

"We are pleased with our deposit growth especially in our new western Massachusetts branches where we have over $80.0 million in new deposits since the two branches opened in the fourth quarter of 2015. Additionally, we look forward to expanding into Vernon and Manchester, CT later this year."

Financial Highlights

·	Net interest income increased $143,000 to $17.5 million in the first quarter of 2016 compared to the linked quarter and increased $1.1 million or 7% compared to the first quarter of 2015.

·	Net interest rate margin increased 6 basis points to 2.82% in the first quarter of 2016 compared to 2.76% in the linked quarter and 2.83% in the prior year quarter.

·	Core noninterest expense to average assets was 2.27% in the first quarter of 2016 compared to 2.37% in the linked quarter and 2.34% in the first quarter of 2015.

·	Our loan to deposit ratio improved to 113.0% compared to 118.6% at December 31, 2015 and 116.9% at March 31, 2015.

·	Tangible book value per share increased to $15.72 for the quarter ended March 31, 2016 compared to $15.47 on a linked quarter basis and $14.82 at March 31, 2015.

 

·	Loans remained flat at $2.4 billion during the quarter ended March 31, 2016 and increased $164.3 million or 7% from a year ago.

·	Overall deposits increased $106.5 million to $2.1 billion in the first quarter of 2016 compared to the linked quarter and increased $209.9 million or 11% from a year ago.

·	Checking accounts grew by 2.5% or 1,284 net new accounts in the first quarter of 2016 and by 13.1% or 6,079 net new accounts from a year ago.

 

·	Net gain on loans sold decreased $77,000 to $490,000 in the first quarter of 2016 compared to the linked quarter primarily due to a seasonal decrease in volume.

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Asset quality improved as loan delinquencies 30 days and greater represented 0.55% of total loans at March 31, 2016 compared to 0.63% at December 31, 2015 and 0.64% at March 31, 2015.  Non-accrual loans represented 0.55% of total loans compared to 0.63% of total loans on a linked quarter basis and 0.64% of total loans at March 31, 2015.

·	The allowance for loan losses represented 0.85% of total loans at March 31, 2016, 0.86% at December 31, 2015 and 0.87% at March 31, 2015.

·	The Company paid a quarterly cash dividend of $0.07 per share during the first quarter, an increase of $0.01 compared to the linked quarter.

First quarter 2016 compared with fourth quarter 2015

Net interest income

·	Net interest income increased $143,000 to $17.5 million in the first quarter of 2016 compared to the linked quarter primarily due to a 5 basis point increase in the loans yield offset by increases in interest expense related to money market and certificate of deposit promotions.

·	Net interest margin increased 6 basis points to 2.82% in the first quarter of 2016 compared to 2.76% in the linked quarter primarily due to a 5 basis point increase in the yield on loans.

Provision for loan losses

·	Provision for loan losses was $217,000 for the first quarter of 2016 compared to $776,000 for the linked quarter.  The decrease was primarily due to $293,000 in charge-offs during the linked quarter related to one commercial customer who is in bankruptcy.

·	Net charge-offs in the quarter were $241,000 or 0.04% to average loans (annualized) compared to $588,000 or 0.10% to average loans (annualized) in the linked quarter.

·	The allowance for loan losses represented 0.85% of total loans at March 31, 2016 compared to 0.86% of total loans at December 31, 2015.

Noninterest income

·	Total noninterest income decreased $568,000 to $2.9 million in the first quarter of 2016 compared to the linked quarter primarily due to a $312,000 decrease in bank owned life insurance income.

·	Other income includes swap fees totaling $315,000 compared to $313,000 in the linked quarter.

·	Net gain on loans sold decreased $77,000 to $490,000 primarily due to a seasonal decrease in volume.

Noninterest expense

·	Noninterest expense decreased $681,000 in the first quarter of 2016 to $15.3 million compared to the linked quarter primarily due to a $352,000 decrease in salaries and employee benefits and a $342,000 decrease in marketing.

·	Salaries and employee benefits decreased $352,000 on a linked quarter basis primarily due to a $465,000 decrease in incentives offset by a $161,000 increase in employee benefits.

·	Marketing decreased $342,000 on a linked quarter basis primarily due to costs incurred in the linked quarter related to our expansion into western Massachusetts.

Income tax expense

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Income tax expense was $1.3 million in the first quarter of 2016 compared to $1.7 million in the linked quarter.  The decrease in income tax expense was primarily due to a linked quarter $768,000 valuation allowance related to a deferred tax asset associated with the establishment of the Bank's foundation in 2011 offset by an increase in income before taxes.

First quarter 2016 compared with first quarter 2015

Net interest income

·	Net interest income increased $1.1 million to $17.5 million in the first quarter of 2016 compared to the prior year quarter due primarily to a $199.1 million increase in the average loan balance offset by a $660,000 increase in interest expense.

·	Net interest margin decreased 1 basis point to 2.82% in the first quarter of 2016 compared to 2.83% in the prior year quarter.

Provision for loan losses

·	Provision for loan losses was $217,000 for the first quarter of 2016 compared to $615,000 for the prior year quarter.

·	Net charge-offs in the quarter were $241,000 or 0.04% to average loans (annualized) compared to $343,000 or 0.06% to average loans (annualized) in the prior year quarter.

·	The allowance for loan losses represented 0.85% of total loans at March 31, 2016 and 0.87% of total loans at March 31, 2015.

Noninterest income

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Total noninterest income increased $236,000 to $2.9 million in the first quarter of 2016 compared to the prior year quarter primarily due to a $111,000 increase in customer service fees, $141,000 increase in bank owned life insurance income and a $282,000 increase in other noninterest income offset by a $273,000 decrease in gain on sales of investments.

·	Other income increased $282,000 to $458,000 in the first quarter of 2016 compared to the prior year quarter primarily due to a $314,000 increase in swaps fees offset by a $76,000 decrease in mortgage banking derivatives income.

·	There was no gain on sale of investments in the first quarter of 2016 compared to $273,000 gain on sale of investments in the prior year quarter.

Noninterest expense

·	Noninterest expense increased $340,000 in the first quarter of 2016 to $15.3 million compared to the prior year quarter primarily due to a $586,000 increase in salaries and employee benefits offset by decreases in occupancy expense and other operating expenses.

·	Salaries and employee benefits increased $586,000 primarily due to our branch expansion into western Massachusetts and to maintain the Bank's growth.

Income tax expense

·	Income tax expense was $1.3 million in the first quarter of 2016 compared to $976,000 in the prior year quarter.  The increase in income tax expense in the first quarter of 2016 was primarily due to a $1.4 million increase in income before taxes.

March 31, 2016 compared to March 31, 2015

Financial Condition

·	Total assets increased $152.5 million or 6% at March 31, 2016 to $2.7 billion compared to $2.5 billion at March 31, 2015, largely reflecting an increase in net loans.

·	Our investment portfolio totaled $148.6 million at March 31, 2016 compared to $194.8 million at March 31, 2015, a decrease of $46.2 million due to reduction in collateral requirements.

·	Net loans increased $163.3 million or 8% at March 31, 2016 to $2.4 billion compared to $2.2 billion at March 31, 2015 due to our continued focus on commercial and residential lending.

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Deposits increased $209.9 million to $2.1 billion at March 31, 2016 compared to $1.9 billion at March 31, 2015 primarily due to increases in NOW accounts, demand deposits and certificates of deposit as we continue to develop and grow relationships in the geographical areas we serve.  We entered the brokered deposit market during the second quarter of 2015 with balances totaling $43.2 million at March 31, 2016.

·	Federal Home Loan Bank of Boston advances decreased $49.1 million to $259.6 million at March 31, 2016 compared to $308.7 million at March 31, 2015.  Advances are used to support loan and securities growth.

Asset Quality

·	At March 31, 2016, the allowance for loan losses represented 0.85% of total loans and 154.08% of non-accrual loans, compared to 0.86% of total loans and 135.44% of non-accrual loans at December 31, 2015 and 0.87% of total loans and 136.53% of non-accrual loans at March 31, 2015.

·	Loan delinquencies 30 days and greater represented 0.55% of total loans at March 31, 2016 compared to 0.63% of total loans at December 31, 2015 and 0.64% of total loans at March 31, 2015.

·	Non-accrual loans represented 0.55% of total loans at March 31, 2016 compared to 0.63% of total loans at December 31, 2015 and 0.64% of total loans at March 31, 2015.

·	Net charge-offs in the quarter were $241,000 or 0.04% to average loans (annualized) compared to $588,000 or 0.10% to average loans (annualized) in the linked quarter and $343,000 or 0.06% to average loans (annualized) in the prior year quarter.

Capital and Liquidity

·	The Company remained well-capitalized with an estimated total capital to risk-weighted asset ratio of 12.88% at March 31, 2016.

·	Tangible book value per share is $15.72 compared to $15.47 on a linked quarter basis and $14.82 at March 31, 2015.

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During the first quarter of 2016, the Company repurchased 147,100 shares of common stock at an average price per share of $16.13 at a total cost of $2.4 million.  Repurchased shares are held as treasury stock and will be available for general corporate purposes.  The Company had 610,645 shares remaining to repurchase at March 31, 2016 from prior regulatory approval.

·	At March 31, 2016, the Company continued to have adequate liquidity including significant unused borrowing capacity at the Federal Home Loan Bank of Boston and the Federal Reserve Bank, as well as access to funding through brokered deposits and pre-approved unsecured lines of credit.

About First Connecticut Bancorp, Inc.

First Connecticut Bancorp, Inc. (NASDAQ: FBNK) is a Maryland-chartered stock holding company that wholly owns Farmington Bank. Farmington Bank is a full-service, community bank with 23 branch locations throughout central Connecticut and western Massachusetts, offering commercial and residential lending as well as wealth management services. Established in 1851, Farmington Bank is a diversified consumer and commercial bank with an ongoing commitment to contribute to the betterment of the communities in our region. For more information regarding the Bank's products and services and for First Connecticut Bancorp, Inc. investor relations information, please visit www.farmingtonbankct.com.

Conference Call

First Connecticut will host a conference call on Thursday, April 21, 2016 at 10:30am Eastern Time to discuss first quarter results.  Those wishing to participate in the call may dial-in to the call at 1-888-336-7151.  The Canada dial-in number is 1-855-669-9657 and the international dial-in number is 1-412-902-4177.  A webcast of the call will be available on the Investor Relations Section of the Farmington Bank website for an extended period of time.

Forward Looking Statements

In addition to historical information, this earnings release may contain forward-looking statements for purposes of applicable securities laws. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Such forward-looking statements may or may not include words such as "believe," "expect," "anticipate," "estimate," and "intend" or future or conditional verbs such as "will," "would," "should," "could," or "may." Forward-looking statements are subject to numerous assumptions, risks and uncertainties. There are a number of important factors described in documents previously filed by the Company with the Securities and Exchange Commission, and other factors that could cause the Company's actual results to differ materially from those contemplated by such forward-looking statements. The Company undertakes no obligation to publicly release the results of any revisions to those forward-looking statements which may be made to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events.

Non-GAAP Financial Measures

In addition to evaluating the Company's financial performance in accordance with U.S. generally accepted accounting principles ("GAAP"), management routinely supplements their evaluation with an analysis of certain non-GAAP financial measures, such as core net income, the efficiency ratio and tangible book value per share. A reconciliation to the most directly comparable GAAP financial measure; net income in the case of core net income and the efficiency ratio and stockholders' equity in the case of tangible book value per share, appears in the accompanying Reconciliation of Non-GAAP Financial Measures table.

We believe that providing certain non-GAAP financial measures provides investors with information useful in understanding our financial performance, our performance trends and financial position. Specifically, we provide measures based on what we believe are our operating earnings on a consistent basis and exclude non-core operating items which affect the GAAP reporting of results of operations. The Company believes that core net income is useful for both investors and management to understand the effects of items that are non-recurring and infrequent in nature. The Company believes that the efficiency ratio, which measures the costs expended to generate a dollar of revenue, is useful in the assessment of financial performance, including non-interest expense control. The Company believes that tangible book value per share is useful to evaluate the relative strength of the Company's capital position. The Company does not have goodwill and intangible assets for any of the periods presented. As such, tangible book value per common share is equal to book value per common share.

We utilize these measures for internal planning and forecasting purposes. These non-GAAP financial measures should not be considered a substitute for GAAP basis measures and results, and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure.

 

 

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(1)	On a fully-tax equivalent basis.

(2)	Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities on a tax-equivalent basis.

(3)	Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(4)	Net interest margin represents tax-equivalent net interest income divided by average total interest-earning assets.

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(1)	Represents a valuation allowance related to a deferred tax asset associated with the establishment of the Bank's foundation in 2011.

(2)	Represents core noninterest expense divided by the sum of core net interest income and core noninterest income.

(3)	Represents ending stockholders' equity less goodwill and intangible assets (excluding mortgage servicing rights) divided by ending common shares outstanding.

The Company does not have goodwill and intangible assets for any of the periods presented.